In a Booming Cryptocurrency Market, How Does Each Coin Stack Up?

Cryptocurrencies are a rather new entrant into the fintech industry, and first came onto the scene with bitcoin nearly ten years ago. This pioneering token has built itself a social standing which remains unrivaled despite its many competitors.

Even institutions are increasing their own levels of participation, following the listing of mutual fund products designed to track their value and an upcoming launch of futures contracts.

These decisions come on the coattails of the investing public’s demand for crypto assets in a more reputable, legitimate trading environment. All the signs point to cryptocurrency becoming a big part of our future, which further benefits the crypto market’s biggest players. When cryptocurrency investing and trading, knowing the differences between these coins is key.

Bitcoin

Bitcoin was developed and released in 2008 by Satoshi Nakamoto, the rumored individual or group behind the whitepaper that focused on cryptographic hashing and the power of the blockchain architecture underlying its design. The digital coin was launched in 2009 as the first decentralized payment method, and it was accompanied by the blockchain network to run bitcoin itself. The latter was developed to provide clients with a transparent, safe, and self-sufficient way to ensure its survival.

Bitcoin, however, did not limit itself to the cryptocurrency realm, and soon became an asset that could be traded for flat currencies like the US dollar and Euro. Our current situation was born, where traders prefer crypto investments to other assets due to their high degree of intraday volatility and separation from traditional markets. Bitcoin’s name has brought it huge increases in price, yet it remains in high demand despite its uphill battle to replace cash.

Bitcoin Cash

Bitcoin cash was created due to a disagreement between bitcoin core and a small group of developers regarding the scaling debate. Bitcoin’s developer team did not want to increase the block size limit to accommodate more transactions and faster processing speeds, instead deciding to adopt SegWit. SegWit is original bitcoin’s software that minimizes individuals’ transactions by moving the data to second layer solutions (still in development). The disagreement resulted in a hard fork during August, when holders were first introduced to bitcoin cash.

This token differed from bitcoin by having immediately increased the block size limit to 8MB, so the blockchain could accommodate more incoming data and improved processing speeds. Furthermore, the younger offshoot incorporated the Emergency Difficulty Adjustment (EDA) algorithm, so transaction verifications are kept short and cheap. EDA automatically decreases the mining difficulty to incentivize miners to participate and perpetuate such a system. Although in principle it operates very similarly to bitcoin, the ultimate purpose of bitcoin cash is greater transactability, improving its position as a currency instead of an investment asset, and therein is the impetus for its healthy price.

Litecoin

Litecoin, which was created in 2011, is like bitcoin and bitcoin cash, but does not have the same amount of drama that stems from the scaling debate. Instead of deploying the same SHA-256 algorithm used by bitcoin and bitcoin cash, Litecoin has Scrypt, which favors higher volumes of data. This allows Litecoin to have faster transaction verification times, which in turn enables its miners to process more data in less time. This token further bases its mining on GPUs, which are graphic cards that are connected to personal computers instead of the more significant hardware requirements employed by bitcoin miners.

Litecoin ultimately was a driving force behind the Lightning Network, a second layer solution which was designed to improve processing speeds and handle storage for larger volumes of data. SegWit enabled the addition of second layer services like this, designed to keep chains operating as smoothly as possible. This has kept litecoin in close relationship with bitcoin, and their daily gains and losses usually run in parallel.

Dash

While Dash was created during 2014 and is considered one of the early cryptocurrencies, it holds only a tiny fraction of the crypto market. This token offers the same functions as bitcoin, but adds some of its own features such as instant or private transactions. Its decentralized network is self-governed, and has a self-funding model. These two attributes make it a Decentralized Autonomous Organization (DAO).  Dash has largely maintained its self-governance and self-funding nature, and sentiment is very positive about its speed and effectiveness. Dash could be a valuable component of a diversified cryptocurrency portfolio thanks to its functionality and principled approach.

Ethereum

Ethereum is an increasingly prominent digital coin and very popular in the cryptocurrency community thanks to its immense business applications, despite being only two years old. Bitcoin, Litecoin, and Dash were around for years before Ethereum entered the crypto market back in 2015. The token did, however, manage to change the cryptocurrency ecosystem as we once knew it. Ethereum introduced the crypto industry to smart contracts and parity, among other things.  It also was a game changer thanks to its functionality to develop a platform for other applications to be built on it, in what is known as an Initial Coin Offering (ICO).

This kind of event both launches a new idea and lets those who are interested buy units of a digital coin hosted on the ethereum blockchain. The ICO trend has swept over the cryptocurrency community, and there are hardly any cryptocurrencies that came after Ethereum which did not have an ICO. In addition to building a universally helpful platform, this coin derives its value thanks to its ability to host new projects on the chain itself.

Ripple

Ripple is a quite a different creature in the crypto market. Rather than exist as a store of value or speculative asset, this digital coin only serves its only purpose as a financial solution. People who are unfamiliar with Ripple might consider it less successful due to its lower price, but this token has experienced the most success in terms of adoption by large scale businesses such as banks and credit card issuers. Some of its better-known clients include UBS, American Express, Credit Agricole, and the Bank of Tokyo Mitsubishi UFJ, among others.

Looking Ahead

While each cryptocurrency has its own unique attributes, attractive advantages, and benefits, the industry is still young to the extent that a dominant solution has yet to surface.  However, the benefits of such a diverse ecosystem mean that the space will continue to evolve and innovate, helping deliver more powerful solutions to a broader range of participants.